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The recent bankruptcy of did not just lift the overall loan default rate to a four-year high of 4.64% by amount – it also drove up the historical default experience of loans with traditional maintenance tests, relative to those with only incurrence tests.

Indeed, EFH’s $19.5 billion loan default pushed the 2008-to-date default experience of covenant-heavy S&P/LSTA Index loans to 19.0%, from 16.6%. By comparison, the corresponding figure for covenant-lite loans is 10.3%. Drilling down to loans that S&P initially rated single-B, the stats are similar, at 19.8% for loans with maintenance tests and 11.0% for those with incurrence tests.

Of course, EFH had an outsized impact on the default rate by amount. By number, covenant-lite loans still defaulted at a lesser rate than did loans with traditional tests, at 14.0% to 17.6% (or 12.7% to 17.4% for loans originally rated single-B).

These data, participants say, reflect the fact that covenant-lite loans skew toward stronger transactions, even within a particular rating band (or at least that has been the case in the past). In fact, no BB covenant-lite loan has defaulted since 2008, versus a 5.2% rate by number for those structured with maintenance tests.

Recovery rates are another indication that covenant-lite loans tended to be more robust during the mid-2000s cycle. Though the data are thin, the average price at which defaulted incurrence-test-only loans exited bankruptcy was 70.0 cents on the dollar, versus 65.6 for loans with traditional tests.

In days gone by, only the most bulletproof issuers were able to command a covenant-lite structure, but now that such structures are standard, some players worry that the covenant-lite designation might not be the seal of approval it once was.

So far this year, in fact, 63.3% of new institutional loans have cleared as covenant-lite, topping 2013’s record share of 57.5%. As a result, 53.3% of S&P/LSTA Index loans now carry only incurrence tests, up from 46.4% at the end of 2013.

Given these data, it is likely that the gap between covenant-lite and covenant-heavy default rates will narrow when the next default cycle hits. By definition, covenant-lite loans will produce more mainstream outcomes as their use spreads.

Still, managers say this evolution will not meaningfully impact overall default rates. By popular consensus, companies don’t default when they breach covenants – they amend. Generally, companies default only when they are unable to service debt.

That’s not to say the covenant-lite juggernaut will not affect returns. After all, the main benefit of maintenance tests for lenders is the ability to get back to the table and extract fees and reset spreads when an issuer struggles to meet tests but is still solvent.

Take the default spike 2008-2010. During that three-year period, issuers loosened tests on roughly 21% of covenant-heavy loans that were outstanding at year-end 2007. On average, these waivers cost the borrowers in question a fee of 57 bps and 201 bps of incremental spread.

Taking this calculation a step further, 86% of Index loans had maintenance tests when 2007 ended. Thus, from 2008-2010, lenders were able to increase the average spread of their legacy portfolio by 36 bps.

Apply those same statistics to today’s Index universe, which is 46% covenant-heavy, and the spread lift – based on the same pace of waivers for covenant-heavy loans and average spread increase – would be just 19 bps.